What's Next for Education Startups in 2019 (Part II)

hi this is Frank Chen welcome to the a16 zine work very excited today to share a conversation I have with Connie chan one of our general partners Connie is one of the world's experts on trends especially consumer trends in China and tech and today we're gonna talk about the future of lifelong learning and she's going to share a few examples of very awesome startups in China she's super interested in what's happening with Gen Z consumers she's very interested in real estate and how people are finding homes preparing their homes to be listed on Airbnb renting homes so on and so forth she's also very inspired by things that entrepreneurs are doing in China that might have applicability here in the United States she helped us find our investments in lime and Pinterest and I think you're gonna have I think you'll really enjoy this conversation that I had with Connie and I have to tell you a funny story before we get started so we did not synchronize our sweaters we've known each other so long that we just knew to come in the same color family so Connie was my first hire at Andreessen Horowitz the Adam Rifkin introduced us Adam at one time and may still be the most connected person on LinkedIn and his whole heart and mission is to connect people and so when I told Adam I was looking for the best a deal partner ever he went and found Connie and I'm so thrilled that you've been here for so long and now are a General Partner looking to make investments so welcome thank you thank you so today we're gonna talk about we're gonna continue our Series in education and talk a little bit about ongoing education and we're so excited about the things that we can do as adults to continue to learn new things and for those of you that know me like learning a new thing is my favorite thing in life so I'm so excited about this episode so Connie why don't you set the context and let's talk a little bit about the things that are working especially in China and I thought maybe it'd be good to just anchor on how much money and how many users people spend on Adult Education because this is very surprising yeah I think about education and learning in a way that goes well beyond K through 12 so I'm actually hyper focused on education for adults people once they've graduated college how can they use online education for self improvement for example and if you look at the dollars abroad I do a lot of studying what's working in China and working in Asia to give me inspiration for ideas here in the States it's a massive market in Asia massive in China I think it's because China has developed all these online education platforms that are specifically made for mobile that unlock all these other new features and benefits and in terms of how big it is I research says that right now online education in China's 150 million users and expected to grow to nearly 300 million by year 2020 it's a forty billion dollar industry expected to grow to 70 billion dollars of course this is a very broad category ization of what counts as education but what's interesting is the way that these research reports break it up the largest group is not k12 it's not even college students the largest groups of students who want to do a self improvement in online education they are 26 to 35 yeah that's super interesting so you would expect sort of the Asian cultures that the parents sending their students to you know after-school enrichment programs and so you think that's where all the money is going but you're saying look it's after they graduate college right right and I think that's because if you take the word education and you expand it just the self improvement self learning then it greatly increases the demographic that you can address and yes a lot of people will just say China education it's huge because parents spent so much money on tutoring and and so forth because of the way the college system works but most of that money is actually going through post college graduates mm-hm it's really interesting because in China what's already happening is what we sort of expect to happen here which is today we have this system where sort of you go through K through 12 and then a subset of those people go to college and then basically at age 22 you're done there's no more formal education and now it's basically the workplaces job to train you right they'll send you to classes and so on and we know that's going to change we know that the world is so dynamic now that you can't learn everything that you need to be a productive worker or citizen by age 22 and you're going to have to learn on going right this is sort of a big part of our investment thesis behind Udacity there's a bunch of courses that a college curriculum would likely never include like how to conduct yourself out a meeting how to speak publicly right right how to how to sleep-train your kid that counts as education parenting courses that counts as education you would never cover that stuff in college yeah and in addition to sort of the Evergreen stuff that you mentioned like you know everybody needs to be a good public speaker everybody needs to know how to this there's also sort of topical things that emerge as marketplaces emerge so I'm thinking about the towel sellers right so Taobao was like eBay here and what happened in Taobao was there were sellers who were experimenting with the system and they kind of figured out what was working for them and they would share online and in videos and Taobao saw this happening and they're like oh let's actually get behind this and push right let's set up Taobao University where we can take our very best sellers and actually have them make money from their content not just their markets yeah completely yeah so awesome so why do you think this is happening already in Asia why are they ahead I think Asia is in general much more mobile first and mobile only of an environment than the state's meaning that if I ask you to go buy a pair of shoes you might naturally flock to your computer yeah to get the best user experience but in Asia you pull up your phone and you'd open the Gmail or the topo app yeah and the idea that your PC and phone are completely interchangeable and you can completely rely on your phone to give you everything you need it's more prevalent in Asia there's also more mobile payments and the idea of paying on your phone is very natural and common to people not just in tier 1 cities but across the country but I think there's three core breakthroughs and insights ages really figured out that has propelled its education markets so much more forward the first one is that they rely on artificial intelligence and machine learning in a much more interesting way so that allows them to unlock products and features and and just ideas that I don't see here in this day so for example there's this company called Lego champ and it teaches you English and typically when we will look at a language learning app here in the States it's very flashcard driven or it will give you a sentence and you can read it but in Asia they realize that people want to learn English not just to be able to read and write but more importantly to have conversations they'll be able to visit the world to interact with other people and so they use the mobile phone and the microphone to allow you to speak directly into the app and read out sentences and actually carry on conversations with a computer that will speak back to you and that kind of scorning using machine learning and artificial intelligence allows people to learn pronunciation hmm what the standalone mobile app and I think that's a fantastic example of like leaning into artificial intelligence and machine learning to dramatically reduce the cost this company lingo champ their gross margins are over 70% hmm teacher cost right said nobody has to sort of say oh that's a terrible accent my funny story on this is when I was learning Chinese Mandarin my Mandarin teacher said to ask me one day are you from Hong Kong which for those of you that don't realize it is probably the most grievous insult that you could hurl at somebody trying to learn Mandarin because it's so bad so so you're saying look they didn't have to have a teacher listening to you and then getting guns they're using the machine learning to say you don't sound like a native and here's where right and because their gross margins are so high their price point is so much lower than having a real-life tutor or even an online course instructor tutor there our price point is is so affordable that people all around the country can access it yeah and that same concept of leaning in wishing and learning is also true and was another category hmm there is this company in China called VIP peléan and peléan in China and Chinese translates to they will practice piano or practice an instrument alongside you and what it is is a mobile app which is a piano teacher hmm and this app you put it on the stand and you attach it to your piano and this teacher can help your kid age five through sixteen learn an instrument they do a piano a violin a bunch of classical Chinese instruments hmm but again it's that price point that they're able to unlock because for a lot of these music instructors so much of that cost is in their travel time or because you're living in a city where the cost of living is just so high right but now in China my teacher doesn't have to live in Beijing they don't have to live in Shanghai they can live anywhere in the country they don't even have to live in China right right and then not only is that the case they use the machine learning aspect to help the teachers with scoring the kids and scoring the performance because with music just like with language there is a actual pitch there is an actual tempo an actual rhythm that you're supposed to play yes right so they can take the composition score and then hear your actual performance and give you a grade which then allows one teacher to teach two or three students at the same time which then unlocks even more cost savings allowing more parents to give their kids music lessons that they would typically not be able to afford mm-hmm I'm flashing back to my piano learning days and I'm hearing that too fast too fast right so now we can do that with machine learning right any night in being able to do that during practice sessions right and having that information feed back to the teacher there's just a lot more we can do with machine learning especially when it comes to language and music that is still I think very untapped here in the West so let's talk a little bit about sort of the efforts that we've sort of seen here and sort of how you think we get from here where we are so we have learning platforms like master class we have learning platforms like you to me we have learning companies like Udacity one of our portfolio companies what's sort of missing from those that sort of the next generation of ed tech startups you're looking for you think will have yeah I I think that the answer is one word its mobile and the reason is because mobile only is in a society that I think is inevitably in our future and when you have mobile that allows for all kinds of different things it allows again for microphone input as an example yeah everyone has a camera a front-facing and about facing camera on their phones which allows for different kinds of input and interaction with a platform mobile allows you to have these bite-size snacks rather than you know opening your Instagram newsfeed maybe you can take a three minute class a five minute class whenever you have downtime and also mobile allows people to not feel like you have to be confined to a video format hmm and I think this is really critical because a lot of long-tail expertise doesn't always naturally suit video for example you can be a math teacher and yes you're writing formulas on the board or you can be a philosophy teacher right and you can be sitting there giving a lecture just sitting there or that same kind of content can be also conveyed through a podcast there an audio format and once you're focused on whoa boy you're not thinking like it has to be video it has to be feel screen immersive it now can also be a podcast that you listen to when you're driving to work when you're walking to work and again I think that that expansion of formats it's really obvious once you make something that is mobile centric hmm so we haven't seen the class of mobile first EdTech that you're expecting to see which is pretty surprising right it's sort of it is sort of an obvious insight once you say it out loud like you did and so and I think I think the reason is because so much of ed tech has been either you pay this one time very expensive tuition yeah or honestly it's ad based right like YouTube is the biggest university in the world yeah and most of the creators are monetizing through advertisements yeah but because it's AD based a lot of the content on YouTube can't go to the depth of searches that you need to really make a big impact on your life or your career because the creators they have these incentives to have to create content that gets lots of clicks and the reality is a lot of self-improvement lifelong learning content is not all cooked baked content right and to go into that depth of what you need to know an ad format is not the best way to compensate these creators so for example if you're buying a house for the first time you need to understand how to think through that transaction it doesn't make sense for someone to create these ad based videos because one they're not going to get all that clicks they need to justify their time and expertise but I mean imagine a platform where someone could package that in 20 30 courses it could be a mixture of audio PDF video a live stream Q&A paid one-on-one consultation and put that all in one format or that crater now can make much more money and have the right incentives to create deeper better content yeah so that makes perfect sense right which is it takes a lot of work to create this content and if you're monetizing with advertising that means only the top 1% are gonna even break even or barely break even on all of that effort right because you need to attract tens of millions of people and as reward production value mmm right so you need the great videographer than er you need to spend an hour on your YouTube thumbnail that's nuts right right because honestly a lot of these great experts a lot of these professors these doctors these nutritionists they are not media experts right and the fact that they have to go hire videographers buy very expensive equipment cameras lighting what have you learn how to edit videos themselves for the first time that's not long term I think going to work because these craters are being underpaid for their knowledge yeah so as I think about my own sort of ongoing education habits YouTube has definitely become one of them which is to say I'm watching TED Talks I did something over the holidays which I'm very proud of which is I haven't placed a doorknob and I'm proud of this because I'm like the least handy person I know and so I watched a YouTube video and went to Home Depot and in my in-laws house I replaced the little doorknob mechanism yes I did it and so you're saying look I know I shouldn't be that proud of myself but I was like giddily proud of myself because like I'm a software person and that was definitely hardware okay so anyway thank you for indulging my burst of enthusiasm for myself there so you're saying look that type of content that's fine for YouTube because like that's super easy right in the final video usually you need to see which part to change out what you able to take out yeah so like ads for that make sense but it doesn't make sense for this sort of highly produced package what I'm teaching you something that's a more serious life skill right I mean like TED talks are fantastic intro courses that's the first great lecture but there should be ten lectures beyond that for every topic right all right and a lot of things that are skill based particular I think deserve having ten courses 20 courses thirty courses so on yeah there's a lot of things that I would be willing to pay for I'd love to pay to to figure out how can I improve my voice I would love to pay to see how can I improve parenting and so forth and there aren't great platforms right now that make it as easy as creating like a Shopify website right for these creators to monetize their knowledge right and these craters typically one they're not media experts - they're not technologists so they don't have time to build their own blogs or their own websites and integrate PayPal or credit card payments into those and and the biggest promise they're truly underpaid right now yeah further knowledge that they're freely sharing on YouTube yeah if you think about sort of an example that is in this ecosystem you think about master class right where the entrepreneurs doing a great job of sort of hoovering up all the top experts in their fields and I think part of the reason he went top-down is sort of the same reason that Elon Musk went to the the Roadster first and then the X and then there are the s and then the X and then the three right so he's working his way down and I think part of that is because I wonder if there's enough cultural support in the West for paying for education of this kind right so it sounds like in China you already have that cultural support so like what is education among household expenses is it like number three or number four after housing and medical right so you have this in bread sort of support cultural support like of course I'm paying for education alright and so it wants mobile sort of content sources sprung up the money just went right and so what do you think is going to happen here do we need more cultural support how does that interaction happen I think the way that we Silicon Valley and platforms can help encourage this shift for more lifelong learning and self-improvement is really breaking away from just the odd base model and finding the right incentives for creators to be able to monetize because I think a lot of creators when they have an ability to make a significant amount of income from sharing their expertise they will create that our content and as there's better content out there users will say hey this is a fantastic way to put a small investment into myself right and and right now the platform's I think are not doing enough to help these craters monetize and for a platform that doesn't just mean changing their business model it also means monetizing their own brand and becoming a mainstream app and mainstream website and that's really important because for a lot of these platforms they shouldn't have just one teacher teaching you how to sing there should be 20 30 teachers and then there should be rankings based off of student reviews or based off people who actually completed the course right and repeat students and so forth and all those things just helped bubble up the best teacher right and these platforms need to do a lot to invest in building out their own rounds to become mainstream in order to do that and and I love the master class content I think once they expand they're gonna have to include more teachers for the same I think sort of go down market it doesn't have to be Steve Martin teaching you how to do comedy it'll be your local comedy genius or it could be all of them together and they could be priced at different price point yeah and then when when you go to lhamo be honest these Mart and you can have them ranked differently right right and I'd love to be able to figure out what are their rankings little classes that people finished what are their rankings where people gave the highest reviews right what are their rankings based off price what-have-you right and all of that kind of data is totally presentable right now it's just not being surfaced by the platform right another sort of age-old challenge in sort of building these pervasive education marketplaces in the past has been you sort of have very broad categories of Education they're sort of let's call it hobby entertaining right I'm learning the piano I want to sing better all right and then there's sort of business self-improvement like I want to learn how to use Excel better or I want to be a better offer up seller or something like that so do you think that there's gonna be one platform that sort of wins both do you think there will be more specialty things that sort of cater to each of these because it feels like they have different dynamics I think it's possible but it's unclear how the future will shake out and then for example I think there's a lot of great workout apps today already right that put a bunch of fitness instructors or nutritionist up against each other and you can choose which instructor you want right and they have that category down pretty well yeah but I also think it's very possible if there was a platform that created the right tools seiner that's like Shopify in a box where I can say here on my podcast here are my blog posts these are the times where I'm going to do a live stream Q&A this is the PDF of the book I'm willing to sell right if it gave creators these options does just turn on these modules right and create their own knowledge store I think it's possible so to have one major platform as well mm-hmm that serves both sort of the hobbyist entertainment market as well as the serious self-improvement market you know it's possible it's not a new startup it could eventually be something that YouTube goes into or something that Twitter goes into Twitter has a ton of influencers too and lots of longtail experts but I think the opportunity is still there and still so early enough that a new startup could take it hmm great if you were to give if you had one or two pieces of advice that you have for entrepreneurs in this space what would it be this is probably a contrarian even in Silicon Valley but I would build for mobile first and I would build your app before you build your website because it will drastically unlock different ways of thinking you'll be able to use your GPS your microphone you'll be able to use the camera and if those new additions of features don't help you brainstorm their things but that's a problem actually you will be able to use in-app payments all right you might be able to use Apple pay and so forth so I think one big thing I would says if you're building for the future consider building this platform first on mobile even before you go to the PC you know I know that's a very contrarian view because a lot of investors will also say go go to the PC first get your brand and then go to the app but I think when you start at least brainstorming at the very least on a mobile platform first it unlocks this idea how could I use a microphone differently and then now that I have microphone and audio input how can I use machine learning differently right and that allows you to unlock ideas like the lingo champ for English learning or like Palin for piano teaching that honestly someone building for a PC would never get to that insight right right and then presumably your next piece of advice would be experiment on the business model right so we've got mobile we found machine learning and now it's like let's do something other than ads yeah for sure yeah for sure I I am NOT a fan of strictly ad based mostly because the ones that do succeed say like a Facebook or Google I mean the reason their ads succeed is not because of the massive page views it's it's also because of all the information they have on that user so the ads are highly targeted Ryan and if you're a platform where you don't have such detailed information on your end users your ads are not as valuable and they're not going to convert as well so focusing on just building up page views and hoping they'll monetize with ads to me as a scary strategy in general for any consumer ah yeah but I think business model experimentation in the education space is huge because I mean a lot of these categories like your skills weird or not right maybe it could sell you you know a similar door they should've sold me a table they should soldier on their door knows I should have sold you other home projects that hey if you take this course buy the components for it at a discount and that can be a partnership with your local Home Depot because geographically they know the local Home Depot it's only two or three miles away from where you are right right and and those ideas are very possible and not being implemented today kind of thinking if this person learned this course what else can I sell them beyond just another course what physical things can I sell them what other services can I sell yeah it seems inevitable that as we continue into world that rapidly changes therefore needs new skills all of the time that the spending pattern here on education will flatten right which is the way I think about education spending over a lifetime today is kind of like there's an elephant inside a Python right which is you spend a lot of money and then you get to college right where you have the 529 plan right to help subsidize my tax deferred dollars to go to university and then basically it drops to zero right it's sort of like a very small proportion of the population spends money on ongoing training and if you spend it it's mostly like oh where can we do it and then I expensed it right but it's nowhere approaching college tuition so it's sort of this big sort of college expense and middle it feels like as we move into a new world like we want to flatten that out right we want to give access to piano teaching for kids smooth it out earlier in life and then we sort of smooth it out later in life too and that's going to require this business model experimentation business model experimentation and just making that information more accessible like if I told you you could spend fifteen dollars and get ten courses on how to improve your voice would you consider it I am looking for our voice instructors right now far more than that but I feel like so many of these ideas or these instructors people oftentimes just forget that they exist because it's not so in their face and it's not also done in a bite-size snacks on their own schedule on their own timeframe right and when you're on a mobile platform when you're doing this bite-sized lessons you can do it every morning yeah well I personally can't wait for a lot of this stuff as I mentioned I love learning new things and I can't wait to have very compelling products that are teaching me new things a little more sophisticated than how to replace a doorknob maybe a little less anticipated should've also sold you services of a handyman nearby in case you failed that's true right luckily there's just so many ways you can monetize a simple video like replacing a doorknob it's not being done today yeah yeah totally true like all these how-to home fixes a good pétanque of people who attempt them can't do it right and they're willing to give up in the middle surrounded by an explosion of tools right I give up right right or I may be missing this part maybe I'm missing this ranch or high power toilet right all right we could have done this in half the time if you have this power job okay these ideas aren't being thought of right now because it's a business model innovation right think about not just sewing that the next course it's nothing more add them to your courses and therefore making your video much longer than it needs to be which is the game that a lot of those influencers have to play they're being forced to play that game right now give them better away monetize what there are songs yeah and that business model would be good for cuz another age-old problem with these education marketplaces that try to get broad alright I want to have all of this content is that the repeat usage is never as good as the entrepreneur hopes right so you kind of hope that I sell you the piano playing class and then you'll come to me for filmmaking or whatever it is and it turns out in a lot of these that you're almost capturing that customer again for the first time even though they've bought a class from you right yeah and to this point is actually I want to say I'm never a fan of subscription models but for this category I don't think subscription is necessarily the best model yeah because for me to sign up for a subscription I have to think I'm going to take more than one class yeah I mean why not instead let me pay per course and for other courses if you want to push discovery allow me to sample the first 10 minutes of a class for free right or do some other kind of incentive to get me to see the value and then maybe after 2 or 3 courses that saw me something like a subscription or I'm like yes for sure I'm gonna use this multiple times over yeah but the idea of jumping from the day one to push you a subscription I think is a hard business model for this category yeah that's hard you have to capture the people who would pay upfront for health clubs right which is it sort of it's the aspirational me that will go to the gym all the time right right yeah well thanks for joining us we're so excited for the future of EdTech that is mobile first and AI enabled and isn't just advertising because I want to learn new stuff I'm gonna learn it all the time the next thing I think in our house will be clearing clutter and so it's funny Marie Kondo has that series on Netflix now and so maybe I should watch it and maybe there will be a tailor-made startup for that type of stuff think and offer me help when I get stuck clearing my own crap so alright thanks YouTube we'll see you next 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Channel: a16z

Views: 12,931

Rating: 4.9586205 out of 5

Keywords: startups, entrepreneurs, education, mobile, machine learning, China, a16z, connie chan, what's next for education startups, andreessen horowitz

Id: glIC16sCakI

Length: 31min 4sec (1864 seconds)

Published: Fri Feb 01 2019